Management’s Role in the Construction

A fundamental problem in mass-production tract-housing construction today is that many owners and managers of large development companies are more familiar with marketing and sales rather than building construction.

The master builder of the past, who knew business, design, and construction from the ground up…has been replaced by MBAs and CPAs whose expertise is in acquiring land, sales-pitching projects to investors, and securing financing.

The corporate office is often comprised of people who have never poured a yard of concrete or hammered a 16-penny nail.  This lack of hands-on experience creates a technical leadership vacuum at the top of the housing development company.

Thus the entrepreneurial energy and creativity that could go into innovating faster, better, and less expensive methods of construction is channeled almost entirely into financing, marketing, and architectural refinements.  Housing construction has therefore remained virtually unchanged for the past 40 years.

Architectural styles, structural designs, building codes, fixtures, and appliances have all improved…but houses are still being assembled using the same methods and techniques that existed when I started my career in construction 45 years ago.

Housing development company managers who do not have a construction background do not know where to begin to initiate changes that would be beneficial to building construction.  Development company owners and managers with backgrounds in real estate, finance, law, and accounting seldom promote innovation in the technical area of the business because they do not understand or are not interested in the nuts-and-bolts details of building construction.

This lack of construction experience in the management of large housing development companies is not pointed out here merely for the sake of being critical.  Instead, it underscores a deeper problem that exists throughout the housing construction industry.  When housing development company owners and managers consciously or unconsciously distance themselves from the technical side of their business…and concentrate solely on finance, marketing, and architecture…the construction operations in the field suffer.

The major obstacle to improving housing construction is that housing development company owners and managers do not realize that they are the key players to start the improvement process.

MBAs, CPAs, and real estate people should not be expected to have the technical knowledge and practical field experience to analyze the construction…but they are in positions that can commit and allocate the time and resources necessary…for more effective and extensive construction analysis and debugging.

This section covers in-house sources of information that can be used to identify a particular company’s construction problems and mistakes.  These sources include:

  • punch lists
  • inspection cards
  • red-lined plans
  • requests for information (RFIs)
  • subcontractor extras
  • homebuyer walkthrough sheets
  • customer service complaint letters

Jobsite archive records for previous projects are sometimes not even kept…much less analyzed, condensed, and organized to be made available to project managers and superintendents starting new multi-unit tract housing or condominium projects.

This lack of lessons-learned information transfer is a lost opportunity because if past design and construction issues are not provided for new and future projects…then each new project must be individually analyzed and debugged from scratch…as if past history did not exist and the construction company was a new start-up company building its first project.

The new project superintendent cannot collect this past document information or allocate time for constructability analysis using this information…for pre-planning and proactive debugging before the start of the actual construction.

The only people who can collect this design and construction information on an on-going basis…and budget the time for upfront planning and analysis for proactive mistake prevention…are the company owners and managers.  If company owners and managers do not see the need to debug the construction on a project-by-project basis…using lessons learned on previous projects…this opportunity task will simply not get done.

This topic of discussion illustrates the differences between housing construction and other types of manufacturing.

Housing development company owners and managers unfamiliar with building construction incorrectly assume that housing construction is so similar and repetitive that it was thoroughly debugged sometime decades ago in the distant past…as a single assembly-line process is initially debugged.  They further assume that the benefits of this already accomplished industry-wide debugging are new common knowledge in the field and only slight differences remain to be resolved between projects.

Owners and managers unfamiliar with building construction think that by hiring an experienced and qualified field staff…and providing good subcontractors…they have exhausted the limits of their possible influence over the course of the construction…and they are partially correct from a functional standpoint.  New housing construction projects do get completed…smoothly or not.

The evidence that supports the notion that they is more that can be done by owners and top managers…to benefit the construction…is the existence of many of the same design and construction problems reoccurring on project after project.

Part of the problem also lies in the overconfidence and overreliance that people unfamiliar with building construction place in architects, engineers, subcontractors, and tradespeople.  Specialization does produce expertise…but it also multiplies the number of areas where less than absolute perfection in each area can add up to a lot of small problems overall.

For owners and managers to assume that the plans are 100 percent accurate and error-free, and that each subcontractor and tradesperson can do everything correctly because each is a specialist…is not being realistic.  Recognizing that everything cannot be 100 percent correct should signify that a strategy is needed…initiated and supported by upper management in terms of data collection and man-hour allocation investment…to proactively identify and remove any remaining conflicts or problems.

Constructability Anaysis

One of the basic problems in housing construction today…in terms of achieving the cost benefits of assembly-line efficiency…is that not enough houses are built at each building site to allow trial-run debugging to extend or project itself over tens of thousands…or hundreds of thousands…of identical products.

For most housing construction projects, after all of the construction problems are resolved…the construction is complete…the house is built…and we move on to a new and different project.

Problem-solving and debugging are an integral part of every new housing construction project…usually from start to finish…because the same product is not repeated in large enough numbers to “build” upon past experience to the point of assembly-line perfection.

An assembly-line approach cannot be used because of the practical reality that houses are too large in size to be fully assembled at one location and then transported overland to another.  Each new house must be assembled piece by piece at its exact location on the building site…and because houses occupy space…only so many can fit on each project site.

Each new housing construction project is therefore a one-time event…limited in time duration by the total number of houses to be built at that site.  Each project is separated from other projects by the distance between building sites…along with the economic competition between rival construction companies.

New housing construction projects have only one opportunity for defensive, proactive problem-solving and assembly-line debugging.  Builders, subcontractors, superintendents, forepersons, and tradespeople must be prepared ahead of time to debug the individual peculiarities of each new housing construction project…or suffer the consequences of schedule delays, cost overruns, and dissatisfied homebuyers.

Like baseball, basketball, or football games…new housing construction projects must have both a defensive and offensive game-plan to achieve success.

This is the blunt and brutally honest opening reality to practical housing construction management…because problem-solving is a part of every person’s work experience on the construction jobsite.

From the apprentice finish carpenter on a tract housing project setting “pre-fit” door components into the rough framed door openings…discovering an opening every six or seven houses that is either two-inches too narrow or too high because the framer mistakenly used the wrong header…who tells his foreman who then goes to find the framer to fix it…to the plumber who discovers at the start of the rough plumbing in one of the tract houses a 6×12 structural wood beam in the floor directly underneath where a bathroom toilet is shown on the architectural plans…completely blocking the location for the toilet drain pipe…to the project manager trying to get the framing contractor to hire the right mix of piece-work crews and individual hourly framing carpenters for the optimum manpower requirements to stay on schedule…rather than the optimum manpower numbers that are financially beneficial for the framing contractor but not the fastest in terms of time…everyone on the jobsite is a participant in proactive mistake-prevention and reactive after-the-fact problem-solving.

As stated earlier in the Introduction…expanded upon here…there is a reason why repetitive problems and mistakes occur over and over again in building construction…that reason is geography…and it must be understood as one of the driving factors that makes building construction unique amongst all manufacturing industries.

Geography is the change agent in building construction that makes it one of the most interesting and satisfying industries to work in.  No two projects are exactly alike…in terms of architectural style, size, price, and quality of amenities.

But geography is also the limiting factor that precludes building construction from mass-production assembly-line efficiency and economy.

No other fully assembled, massive-sized manufactured product is too large to be transported to its final destination…other than civil engineering projects like river dams or underground subways…because all other large products other than buildings…are mobile.

Passenger cruise ships, cargo ships, and navy aircraft carriers are lowered from dry-dock into the water and motor off to their destinations.  747 airliners are rolled out of their assembly hangars, fueled-up, and take-off down runways to their home airports.  Vacation motor-homes are likewise fueled-up and driven down the highway to their sales dealerships.

But houses…the smallest sized buildings… are too large to be transported to building sites after they are fully assembled.  Houses are therefore assembled piece-by-piece on their individual sites…and attached to the ground on foundations designed to match the unique size and shape of the structure.

Transporting larger sized structures such as restaurants, schools, hospitals, high-rise office buildings, and industrial buildings…from an assembly plant to their final destination…in terms of practical logistics is beyond consideration.

Buildings of all types are therefore assembled on unique building lots spread out all over the countryside…which in terms of manufacturing debugging and proactive mistake prevention…divides the process into tens of thousands of isolated pieces…isolated, finite pieces of time and physical space.

This geographical separation of building construction projects…the breaking up of the mass-production assembly-line…presents some challenging problems unique to the building construction industry.

Again, two similar housing construction projects, for example, going up side-by-side, built by different companies, can each be making the same costly mistakes without either one knowing about or being able to benefit from the other’s experience.  The result is that hundreds of thousands of people working in housing construction alone…not counting commercial and industrial building construction…find themselves at different points on the uphill slope of the learning curve, repeating many of the same hard-earned lessons.

This is one of the fundamental problems still remaining in building construction.  Builders, contractors, and architects do not send memos back and forth regarding mistake avoidance.  Every new building construction project struggles with some amount of assembly-line problems that were encountered and solved months or years ago on other projects…yet this information is locked-up within the geographical footprint of these past projects, and locked away within the closely guarded knowledge and experience of savvy people and companies unable or unwilling to share this information…because of economic competition between companies and competition for employment.

In my opinion, debugging building construction is the last major area of information remaining to complete the technology of building construction.  Because of the uniqueness of every new building construction project, and the lack of communication in the building industry regarding mistake prevention, the only way to achieve progress in this area is record problems and mistakes one-by-one as they occur, and then pass along this information.

College Construction Management Programs

There is a debate within construction management programs in colleges and universities spanning the last three decades as to how much engineering should be taught as opposed to construction management.  Because there is more combined subject-matter that could be taught than will conveniently fit within a 4-year degree program, there has and still is a tension between two approaches.  One approach favors more technical education in mathematics, engineering, and the basics of architectural design, while the traditional construction management approach favors classes in estimating, planning, scheduling, cost-control, jobsite safety programs, finance, and project management.

Over the last decade or two, college construction management programs that previously tilted toward a more engineering based focus…are now shifting back towards a greater emphasis upon pure construction management, to meet the demands of the industry.  Large building construction companies are telling colleges they want new graduates coming out of construction management programs to have more skills in project management, and to possess a familiarity and facility with the latest building construction design and project management computer software.

One of the real-world realities that enters into this mix and that requires common-sense consideration, is that high-rise skyscrapers in New York City, for example, are built…in their entirety…without any tradespeople onsite ever having to differentiate or integrate calculus equations as part of their work.  Massively complicated structures are built from the ground up with only the occasional tradesperson applying simple 3-4-5 trigonometry to check the accuracy of the square-ness of their interior wall layout.  The most complicated mathematical computations performed onsite are probably done by the surveying crew.  A large gulf exists therefore between the technical design that occurs in an office environment, and the practical assembly of building components that takes place on the actual building site.  The information that connects the design to the construction is the design calculations, translated into project documents usable by the building tradespeople working onsite, known as the plans and specifications.

The idea that the general contractor’s onsite construction supervision staff would perform complex engineering calculations that displaced the engineering design performed by the project engineers and architect of record, would be a dangerous development.  The last thing the general contractor and subcontractors on a new building construction project want to do is to assume part of the liability for the building’s design.  There has to be a clear separation between design and construction.  Even in the design-build contractual arrangement, we want qualified licensed designers performing the actual design work, with valuable practical input from construction experts.  We do not want half-qualified and partially trained people designing the structural elements or the mechanical systems for even the simplest buildings, no matter how sophisticated the building design computer software is.

How then does this relate to the question of the proper balance between engineering and project management in construction management college programs, especially with the proliferation of highly developed design software systems today?  Where should responsible educators draw the line in crafting curriculums that match the needs of employers and at the same time provide the foundation for professional growth after graduates enter the workforce?

New Home Price Affects Final Quality Approach

The price range of the new house determines the final approach taken to achieve a quality product.

For high-end luxury new homes the various subcontractors directly related to visual quality…the subcontractors for painting, finish carpentry, finish plumbing, drywall, tile, and flooring…to name a few…will not allow the jobsite superintendent or anyone else to make repairs to their work.  In this price range…these subcontractors obtain work through word-of-mouth referrals based upon their reputation…so they take full ownership over the quality of their finished work.

I once worked as the project manager/onsite superintendent on four multi-million dollar houses in Newport Coast, Southern California.  At the completion of the first house, I asked the painting contractor for a small amount of flat wall paint so that I could do minor touchup myself instead of adding these items to an already massive punchlist for a 10,600 square-foot house.  He humorously told me that I cannot touch his work…even the flat wall painting…which was a departure for me coming from a previous background in tract housing where the sheer volume of the number of houses needing final prep precluded getting the painter to touchup every last smudge on the walls.

The opposite approach is found in the economic low-end of production tract housing and condominiums…where the various subcontractors cannot financially afford to do perfect Steinway or Stradivarius workmanship and still make money.

As a superintendent in this price range I learned that it was easier and less time-consuming…after all of the punchlist repairs were made by the subcontractors…to do final prep repairs myself along with assistant superintendents and customer service staff…in order to aim for zero-item homebuyer walkthroughs.

Newly constructed houses in the middle price ranges require some middle ground mix of subcontractor pickup repairs plus some amount of builder prep-crew final touches to achieve final acceptable quality.

In my opinion, people in building construction who say: “the subcontractors should be able to make their final pickup repairs to produce low-item homebuyer walkthroughs” are leaving out the important qualifying information as to the price range of the houses being discussed.

Final quality is not an apples-to-apples comparison when house prices can range from $200 thousand to $10 million.

Projects that Finish Late Lose Money at the Back-End

One of the considerations for new housing projects large and small…large tract housing projects or single-family spec houses…is that construction loan interest becomes larger at the tail-end of the project.

Construction loan interest costs…which are fixed monthly expenses…which must be paid to avoid a loan going into default…are calculated on the total amount of funds that have been disbursed through the loan…and are therefore a growing unpaid balance until the property is sold and loan balance paid off.

At the beginning of the construction the disbursements out of the construction loan are relatively small compared to the total loan amount…and thus the interest costs are also relatively small.

But the vigilant management of time and the sense of urgency in prosecuting the work should never let-up from start to finish…because time gets more expensive as the construction progresses and disbursements accumulate.

This is one reason why constructability analysis based upon recorded past lessons learned is a proactive investment in preventing construction problems that cause delays in time.  Unanticipated design and construction problems that arise throughout the course of the actual construction…that cause work stoppages…and that dovetail with other adverse events like bad weather or materials procurement problems…should be analyzed in terms of their loan interest costs at the tail-end of the project…or the current costs to accelerate the work to catch up on the schedule.

Paying two or three months of loan interest costs at the end of the project for a high-end luxury house that has a loan balance of several million dollars outstanding because the structural plans had problems requiring re-design and resubmittal to the city/county for plan check…resulting in a work stoppage 14 months ago during the concrete and structural steel phase of the project…translates into the most expensive loan interests costs because they are calculate on a near fully disbursed construction loan.

The same concept applies to tract housing, custom homes, and apartment projects.  Time is money…whether in construction loan interest or lost rental income…when projects are completed late.

The point of this post is to suggest that the value of preventive constructability analysis upfront…can be viewed in hindsight as huge when looking back on the costs of a project that finished late.

The value of mistake prevention looking forward at the start of a new project is difficult to calculate…how can the avoidance of a future potential problem that was eliminated ahead-of-time…that did not occur…be evaluated in terms of dollars.

The idea that diligence and urgency is an approach that should be applied uniformly and universally throughout the duration of a housing construction project from start to finish…is a concept that is reinforced by the accelerating accumulation of loan interest costs as the work progresses.

Out-of-pocket Expenses and the Construction Loan

While working as the vice-president of construction and onsite project manager for the construction of four high-end houses in Newport Coast in Southern California…the construction lender could not entirely cover the hard-costs for houses having sales prices of $6.75 to $12.5 million…each house exceeding their loan limits.

We therefore capitalized (owner’s equity) 18-1/2% of the upfront costs of the construction budget, paying out-of-pocket for the concrete work and part of the lumber costs.  The idea here is to postpone the disbursement of construction loan funds to a later point in time during the construction…so as to start the clock for loan interest costs beginning part-way into the total project duration…rather than paying interest on construction disbursements for the entire duration of an 18-month construction schedule.

I also worked for nine years as a construction manager for a bank.  Several savvy single-family builders manipulated their construction disbursements to minimize loan interest payments.  Even though the construction budget lines itemized on the construction loan document have the required funds for each category of the work…the borrower is not required to withdraw/use funds for every budget line-item during the course of the construction.

Some borrowers would complete and sell the new house, close escrow and pay-off the loan…yet still have unused funds in several categories like HVAC, flooring, landscaping, supervision, and builder’s fee…thus not paying interest on the funds leftover in these line-items.  This is a perfectly acceptable approach by the builder/borrower…using out-of-pocket funds for some activities rather than taking disbursements that come with loan interest costs.

The construction lender is required to adequately “fund” the new construction project…but the borrower is not required to use all of the funds itemized in the budget.

Keeping Self-Perform Work Crews Busy

There is a sweet-spot compromise between finding and keeping competent yet economical subcontractors…and maintaining self-performing tradespeople…for the local builder of single-family houses.

I once worked…in my middle twenties…for a home remodeling contractor in a thriving beach community…who maintained an in-house, self-perform crew of six people including himself…with a part-time employee doing occasional rough cleanup…and the usual specialty subcontractors…plumbing, electrical, HVAC, cabinets, drywall, etc.  Our crew did the demolition, concrete, framing, and finish carpentry.     

            The challenge for this remodeling contractor was to always keep enough work out in front of us so we were busy five days a week and occasional Saturdays.  This locally popular remodeling contractor would tell new prospective clients he would accept their project…but it would take three months before the start date.  The other balancing act was to get the subcontractors to show up on time and with full-size crews…as they also had their own challenge of keeping their workforce busy.

Later in my career, I also worked for a large single-family homebuilder doing a mix of “spec” and custom homes in an upscale, economically high-end location…who employed a self-perform crew of 50-plus people in eight specialty trades…plumbing, electrical, finish carpentry, painting, low-voltage, concrete flatwork, tile, and general labor.  This homebuilder subcontracted the other major trades.

The problem for discussion here is that the scheduling and coordination of these varied and different sized work crews…some have 4 or 5 people and others having crew sizes of 10 to 12 people…all having different length durations of time to perform their work on each project…resulted in several projects sitting empty and unmanned for days as crews were shifted daily in the reactive mode of “putting out fires”…in response to never having enough people to go around according to the absolute and overriding imperative of keeping everyone busy.

By employing numerous diverse specialty trades…in order to be both economical and have control over the quality of the work…the builder in this example in essence supervised and managed eight disparate in-house subcontractors with the requirement to give every worker a full-time, 40-hour workweek…otherwise people would leave and find work elsewhere.

The cost for this approach was the loss of overall time.  The number of small clusters of two days here and three days there of projects sitting empty and unworked-on waiting for crews to arrive…added up to most or all of the projects being completed late as much as three to six months.

This particular homebuilder was so committed to this approach that it was unwilling to change…and over time developed a reputation within the community of not being able to deliver their projects on time as promised.

If every person within a large self-perform crew of diverse specialty trades must be kept busy…then what has to give in this arrangement is time.  In the three-way relationship between cost, time, and quality…if cost and quality predominate…then time suffers.

Using subcontractors can be frustrating in terms of controlling manpower and production rates…and in maintaining consistent quality.  But expanding into multiple diverse specialty work crews in-house is not the panacea that it might appear at first glance.